How can family offices — and financial advisors — help wealthy families maintain their fortunes?
1. FAMILY CONTINUITY
Wealthy families face a fundamental question, explains
Families who are merely content to "consume the benefits of their situation" aren't going to accomplish anything, Hamilton warns.
Also critical, the guide says, will be teaching young family members "the meaning of stewardship."
2. PURCHASING POWER
The benefit of a family office, Hamilton says, " is really about scale … You want to be viewed as an institutional player, and you want to be savvy, so you're not going to be taken advantage of by the sell side."
Use the buying power of the family group to get access to best-in-class resources, invest in the best available technology and investigate the cost of outsourcing services, the FOX Guide recommends.
Family offices now have more opportunities than ever, says Hamilton, to use their purchasing power to buy from multiple providers. For example, over the past year family offices have been more easily able to access different vendors for investment strategy, manager selection and performance analytics services.
A major "trend shift" of 2013 saw single-family offices buying more strategic services from multifamily offices, Hamilton adds. "It's beneficial for both," she says. "Families get the benefit of scale; they can talk to different money managers and get strategic insight from a variety of sources."
3. SUCCESSION & GOVERNANCE
Succession planning isn't just a problem for individual advisors, Hamilton notes. "In
Additionally, the FOX Guide emphasizes the need to develop written leadership succession plans for the family office and select leaders who are excellent communicators, educators and consensus builders. Families need to bring in non-family professionals to provide management objectivity; educate family members about financial affairs in a meaningful way; and train future leaders and managers to ensure continuity.
Wealthy families should be prepared to spend over
But the investment is worth it, she adds. "We've seen a shift in the last few years — more families are recognizing they need formal education about being an owner, versus being a manager."
4. RISK MANAGEMENT
Families need to document the most important risks they face, according to the
"Since the financial crisis, we've seen families have a much greater awareness of where the risks are and have a willingness to spend money to mitigate some of those risks," Hamilton says.
Also on the to-do list: Develop action plans to mitigate the risks recognized by the family; evaluate the success of risk mitigation plans on an annual basis; and educate owners about potential risks and how to avoid or control them as much as possible.
• For Wealthiest Clients, a Key Question
• What Multifamily Offices Need Now
• New Firm Offers Governance, Succession Planning Help
|Copyright:||(c) 2014 Financial Planning. All rights Reserved.|
|Source:||Source Media, Inc.|